12. Organics Plus is considering which bad debt estimation method works best for itscompany. It is decidıng between the ncome statement method, balance sheet method ofreceivables, and balance sheet aging of recervables method. If it uses the incomestatement method, bad debt would be estimated at 4% of credit sales. If it were to use thebalance sheet method, it would estimate bad debt at 12% of accounts receivable. If itwere to use the balance sheet aging of receivables method, it would split its receivablesinto three categories: 0-30 days past due at 6%, 31-90 days past due at 19%, and over 90 Stillerdays past due at 26% There is currently a zero balance, transferred from the prior year'sAllowance for Doubtful Accounts. The following information is available from the year-end income statement and balance sheet.2018 Year-End Totals for Organics PlusCredit salesAccounts receivable$1,850,000600,000There is also additional information regardıng the distribution of accounts receivable by age.Past-Due CategoryAccounts Recelvable Total0-30 days31-90 daysOver 90 days$350,000100,000150,000Prepare the year-end adjusting entry for bad debt, usingA. Income statement methodB Balance sheet method of recervablesC Balance sheet aging of receivables method.D. Which method should the company choose, and why?

Journal entry is the primary entry that records the transactions initially.

12. Organics Plus is considering which bad debt estimation method works best for its company. It is deciding between the mcome statement method, balance sheet method of receivables, and balance sheet aging of receivables method. If it uses the income statement method, bad debt would be estımated at 4% of credit sales. If it were to use the balance sheet method, it would estimate bad debt at 12% of accounts receivable. If it were to use the balance sheet aging of receivables method, it would split its receivables into three categories: 0-30 days past due at 6%, 31-90 days past due at 19%, and over 90

12. Organics Plus is considering which bad debt estimation method works best for its company. It is deciding between the mcome statement method, balance sheet method of receivables, and balance sheet aging of receivables method. If it uses the income statement method, bad debt would be estımated at 4% of credit sales. If it were to use the balance sheet method, it would estimate bad debt at 12% of accounts receivable. If it were to use the balance sheet aging of receivables method, it would split its receivables into three categories: 0-30 days past due at 6%, 31-90 days past due at 19%, and over 90

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter9: Accounting For Receivables

Section: Chapter Questions

Problem 15PA: Organics Plus is considering which bad debt estimation method works best for its company. It is...

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Organics Plus is considering which bad debt estimation method works best for its company. It is deciding between the income statement method, balance sheet method of receivables, and balance sheet aging of receivables method. If it uses the income statement method, bad debt would be estimated at 4% of credit sales. If it were to use the balance sheet method, it would estimate bad debt at 12% of accounts receivable. If it were to use the balance sheet aging of receivables method, it would split its receivables into three categories: 0â€“30 days past due at 6%, 31â€“90 days past due at 19%, and over 90 days past due at 26%. There is currently a zero balance, transferred from the prior years Allowance for Doubtful Accounts. The following information is available from the year-end income statement and balance sheet. There is also additional information regarding the distribution of accounts receivable by age. Prepare the year-end adjusting entry for bad debt, using A. Income statement method B. Balance sheet method of receivables C. Balance sheet aging of receivables method. D. Which method should the company choose, and why?
Racing Adventures records bad debt using the allowance, income statement method. They recorded $134,560 in accounts receivable for the year and $323,660 in credit sales. The uncollectible percentage is 6.8%. What is the bad debt estimation for the year using the income statement method?
Organics Plus is considering which bad debt estimation method works best for its company. It is deciding between the income statement method, balance sheet method of receivables, and balance sheet aging of receivables method. If it uses the income statement method, bad debt would be estimated at 4 percent of credit sales. If it were to use the balance sheet method, it would estimate bad debt at 12 percent of accounts receivable. If it were to use the balance sheet aging of receivables method, it would split its receivables into three categories: 0–30 days past due at 6 percent, 31–90 days past due at 19 percent, and over 90 days past due at 26 percent. There is currently a zero balance, transferred from the prior year’s Allowance for Doubtful Accounts. The following information is available from the year-end income statement and balance sheet. 2018 Year-End Total for Organics Plus Credit Sales $1,810,000 Accounts Receivable 600,000 There is also additional information…
Using the aging approach, management estimates that10%of the$10,000of Accounts Receivable will be uncollectible. The Allowance for Doubtful Accounts has a$100unadjusted debit balance. After the bad debt adjusting entry is recorded, Bad Debt Expense on the income statement will be the Allowance for Doubtful Accounts on the balance sheet. Multiple Choice$100less than$100more than the same amount as$9,900more than
In 2013, Coca-Cola had a receivables turnover ratio of9.3. Which of the following actions could Coca-Cola taketo cause the ratio to increase?a. Pursue collections more aggressively.b. Increase the percentages used to estimate bad debts.c. Factor its receivables.d. All of the above.
Suppose a company’s current credit terms are 1/10,net 30, but management is considering changingits terms to 2/10, net 40, relaxing its credit standards, and putting less pressure on slow-payingcustomers. How would you expect these changesto affect (a) sales, (b) the percentage of customerswho take discounts, (c) the percentage of customers who pay late, and (d) the percentage of customers who end up as bad debts?
Assume that Mingenback Company estimates its bad debt expense based on 6% of accounts receivable. What amount of bad debt expense will Mingenback record if it has an Allowance for Doubtful Accounts credit balance of $3,000?
Which of the following best describes the objective of estimating bad debt expense with the percentage of credit sales method? a.To estimate the amount of bad debt expense based on an aging of accounts receivable. b.To estimate bad debt expense based on a percentage of credit sales made during the period. c.To determine the amount of uncollectible accounts during a given period. d.To facilitate the use of the direct write-off method.
They recorded $134,560 in accounts receivable for the year and $323,660 in credit sales. The uncollectible percentage is 6.8%. What is the bad debt estimation for the year using the income statement method?
For many years, Carefree Company has estimated BadDebt Expense using the aging of accounts receivablemethod. Assuming Carefree has no write-offs or recoveries, its estimate of uncollectible receivables resulting fromthe aging analysis equalsa. Bad Debt Expense for the current period.b. The ending balance in the Allowance for DoubtfulAccounts for the period.c. The change in the Allowance for Doubtful Accountsfor the period.d. Both ( a ) and ( c ).
Net credit sales $831, 400 Account Receivable 222,850 Allowance for Doubtful Account 0. Do the following: Compute bad debt estimation using the income method, where the percentage uncollectible is 5%. Prepare the journal entry for the income statement method bad debt estimation. Compute bad debt estimation using the balance sheet method of percentage of receivables, where the percentage uncollectible is 9%. Prepare the journal entry for the balance sheet method bad debt estimation.
A company's management estimates that 2.5% of net credit sales will be uncollectible net credit sales are 115,000 what will the amount of bad debt expense be reported on the income statement